ARMY CORPS:

Industry, Obama admin wrestle over funding for waterway maintenance

President Obama's plan that calls for shipping interests to pick up more of the tab for channel-deepening projects and repairing and upgrading locks and other infrastructure along waterways is facing fierce industry opposition.

The waterway proposal in Obama's deficit-reduction plan would generate $1 billion over a decade by charging fees for vessels that use waterways. The proposed two-tier fee -- which would charge the most for users of locks on rivers such as the Ohio, Tennessee and Upper Mississippi -- would supplement revenue raised in an existing 20-cents-a-gallon fuel tax.

Michael Toohey, president and CEO of the Waterways Council, an industry group, decried the plan as a massive tax increase. "The proposed legislation would more than double the amount of taxes and fees on one beneficiary of our nation's waterways: commercial shippers," Toohey said in a statement. "These new economic burdens will disrupt the fragile economic recovery by unfairly disadvantaging consumers who will surely pay more for their goods and electricity."

But supporters of the waterway fees say industry should pay roughly double what it does now, as the administration has indeed proposed. Congress established a 20-cent diesel fuel tax for waterways users in 1986 to pay half the cost of infrastructure projects done by the Army Corps of Engineers, but the White House says that fee covers only 8 percent of the system's price and leaves taxpayers to pay the balance for maintaining 12,000 miles of waterways and 238 locks.

"If they really want to spend a lot more money on the inland waterway system, a lot more of that money has to come for the inland waterway users," said Steve Ellis, vice president of the nonpartisan Taxpayers for Common Sense. "Otherwise, it's going to come from every other corps constituency."

At issue is an Army Corps budget that has taken a pounding on Capitol Hill. Both the House and Senate are proposing to roll the corps' civil works budget back to 2005 levels next year, effectively making competition for project funding a zero-sum game.

The waterways industry put up its own funding plan last April that Obama administration officials dismissed, saying it would shift a larger share of the financial burden for infrastructure work from shippers to federal taxpayers.

The industry's plan calls for increasing the 20-cents-a-gallon fuel tax -- which hasn't budged since 1996 -- by 6 to 9 cents a gallon. But it would take project-funding formulas that now split costs between the federal government and local and private interests and shift most costs to the government.

Among the costs that the industry wants to shift to taxpayers are cost overruns -- which can add up to billions of dollars on big-ticket projects -- all rehabilitation projects that cost less than $100 million, and all dam-building projects. The industry says dam building benefits far more than just shippers, as the structures provide water supply, electricity generation and recreational opportunities.

Industry representatives say their proposal is fair. Otherwise, they say, they must write a blank check for half the construction projects with huge cost overruns. For example, costs for the Olmstead Locks and Dams near Olmstead, Ill., have tripled from $775 million when the project was begun in 1996 to more than $2 billion.

"It's 50 percent, no matter what the cost of the project is, and no matter how long the government takes to build it," Toohey said. "Now we're staring down some hundreds of millions of dollars of new costs at Olmstead, and we're writing the check for 50 percent of that cost under current law."

And agribusinesses that are heavy users of inland waterways say costs of infrastructure will get passed to grocery consumers and farmers.

"What we want to do is grow more things, and manufacture more things that the world demands," said Mike Steenhoek, executive director of the Soy Transportation Coalition. "If that is our ultimate goal, that would suggest to me that you should not place disproportionate burden on those places and those entities that are meeting that mandate and meeting that goal."

But Ellis, of the watchdog group, dismissed the industry's proposal as a grab for subsidies. "I thought about how to charitably characterize the proposal, but all I could come up with was -- greedy," he told a House panel last month.

Deficit reduction

In the grand scheme of the federal budget, waterways funding is a small matter. Congress' "supercommittee" is tasked with drawing up a plan to cut at least $1.2 trillion in federal spending by Thanksgiving. At issue for inland waterways is $7.6 billion, the industry says.

It's not clear whether the debt committee will act on either the president's proposal.

"They've got bigger fish to fry than to try to figure out exactly how the inland waterways system gets financed," Ellis said. "But I could be wrong."

But industry lobbyists expect to press their case to the debt panel and also plan to meet with officials at the White House Office of Management and Budget next week. In promotional materials and television commercials the Waterways Council aired in the Washington, D.C., metropolitan area, the industry touts itself as a low-emissions, more fuel-efficient mode of transport than truck or rail.

But the industry's critics note that energy efficiency gains are lost when you consider that goods moved along waterways can only flow where there are rivers and require trucks or rail to move cargo to their final destination.

"The tired old claims about barge efficiency repeated in the Council's 30-second spot have long been debunked," Brad Redlin, director of the agricultural program for the Izaak Walton League of America, said in an email.

It's unclear just how much of the $1 billion generated under the administration's proposed waterway fees would go toward closing the federal budget gap. Industry lobbyists say the White House has proposed investing $400 million annually in the waterways system, and the administration counted the full $1 billion as deficit reduction in its plan.

Here's how the deficit plan puts it: "This additional revenue would enable a more robust level of funding for safe, reliable, highly cost effective, and environmentally sustainable waterways, and contribute to deficit reduction and economic growth."

'Ancient facilities,' quirky funding

Few argue the nation doesn't have infrastructure problems along its inland waterways.

In 2007, a busier-than-average year, ships moved 550 million tons of goods on inland waterways, or just less than 5 percent of the total domestic freight. Those shipments -- mostly grain, coal, steel, petroleum and crushed rock -- face costly delays because of increasingly frequent shutdowns and breakdowns of the aging locks and mounting dredging needs in river channels that are silting in.

More than half of the nation's locks are more than 50 years old and have exceeded their design lives. In 2007, the nation's locks racked up 157,430 hours of downtime for scheduled and unscheduled repairs.

The system's age shows. At the 82-year-old Lock 52 on the Ohio River near Brookport, Ill., 16 workers still hook wooden barriers that sit on the river floor to a steam-powered crane to adjust water levels so ships can pass.

Silting also poses a growing problem, especially after this year's record-breaking floods. In June, the Waterways Coalition declared a "dredging emergency" on the lower Mississippi River, the system's central artery, responsible for moving more than 6,000 vessels and 450 million tons of freight annually.

"The president has called for the doubling of exports from the United States in the next five years," Toohey told a House subcommittee last month. "If we do not properly invest in the waterways of this country, it will be impossible to achieve that worthy goal."

None of this was a problem in the late 1990s. After vessel operators began paying the 20-cent-per-gallon fuel tax in 1996, money poured into the Inland Waterways Trust Fund faster than Congress could spend it. Surpluses grew to a peak in 2002 of $413 million.

But the buying power of the fuel tax, which generates about $70 million to $90 million annually, has eroded. "What else relative to fuel hasn't increased one penny since 1996?" said Redlin of the Izaak Walton League.

That and a spending binge left the fund short on cash for the first time in 2009. The fund now lives hand-to-mouth, and the gap between expenditures and revenues is only expected to grow in coming years.

Blame also rests with a quirk in the design of the Inland Waterways Trust Fund. Unlike federal trust funds devoted to highways, aviation and harbors, the inland waterways fund does not cover maintenance. That tab is picked up entirely by the federal government.

Federal money flew out the window to maintain waterways that saw almost no traffic, and few in industry objected.

Noting how little traffic moved along the Chattahoochee River one year, former Rep. Tom Tancredo (R-Colo.) quipped that it would have been "cheaper to ship cargo by limousine."

Regional issue

The issue is not so much one of Republicans versus Democrats, but rather one that pits one region against another.

The chairman of the House Water Resources Subcommittee, Republican Bob Gibbs of Ohio, declined though a spokeswoman to take sides and promised to hold additional hearings.

Republicans such as Gibbs, a freshman who signed a pledge not to raise taxes, find themselves having to choose the lesser of two evils: raising fees on the waterways industry -- a tax increase on business -- or asking the government to spend more money.

"While I believe that investing in inland waterway infrastructure will have economic payoffs and create permanent jobs from the boost in economic activity, we also have to realize that the nation faces an overriding need to stop out-of-control federal spending," Gibbs said. "That makes developing a workable framework for funding inland waterways infrastructure very challenging."

Rep. Tim Bishop (D-N.Y.), the ranking member on the subcommittee, directed his criticism at the industry's proposal at a recent hearing, saying it should be willing to shoulder more of the burden of maintaining waterways.

"The bottom line is that with reduced funding, federal agencies will be forced to do less with less," he said. "I remain skeptical of the logic of shifting even greater portions of these costs onto the American taxpayer."

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